2026-VIL-1395-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Invocation of extended period of limitation under proviso to Section 73(1) of Finance Act, 1994 – Show Cause Notice issued on basis of discrepancy between Form 26AS and ST-3 Returns – Whether extended period of limitation could be invoked without establishing fraud, collusion, wilful misstatement, suppression of facts or contravention of statutory provisions with intent to evade Service Tax – HELD – The entire demand has been raised solely on basis of comparison between figures reflected in Form 26AS and those disclosed by Appellant in ST-3 Returns and material constituting very basis of demand was never outside knowledge or reach of Department as both Form 26AS and ST-3 Returns are statutory records maintained under law and available to Department for scrutiny, verification and reconciliation in ordinary course of administration. No independent investigation preceding issuance of Show Cause Notice was undertaken except for noticing alleged difference between figures and Department has not conducted any enquiry to ascertain precise nature of receipts, taxability thereof, contractual arrangements, accounting treatment adopted by Appellant, or whether differential figures represented taxable consideration. No independent evidence has been brought on record to establish any positive act of fraud, collusion, wilful misstatement or deliberate suppression attributable to Appellant. Such approach falls substantially short of statutory threshold required for invocation of extended period as the proviso is in nature of exceptional provision and cannot be pressed into service merely because discrepancy is subsequently noticed during scrutiny of records - Mere existence of variance between Form 26AS and ST-3 Returns without anything more cannot lead to conclusion that Appellant had indulged in fraud, wilful suppression or misstatement so as to justify recourse to extended period. The normal period of limitation expired on 05.03.2020 and the SCN was issued on 30.12.2020, nearly ten months thereafter, thus the demand falls beyond normal period prescribed by law. Delays in filing certain returns though not of such magnitude as to justify inference of deliberate suppression cannot have effect of indefinitely postponing commencement of limitation and normal period in respect of all returns had expired much prior to issuance of SCN – The extended period of limitation is not invokable. The demand of Service Tax, interest and penalty are set aside - Service Tax – Mandatory requirement of pre-show cause notice consultation – Show Cause Notice dated 30.12.2020 proposing demand of Service Tax exceeding fifty lakhs issued without affording opportunity of pre-show cause notice consultation – Whether Show Cause Notice is void ab initio for non-compliance with Board Instructions dated 21.12.2015 read with Circular dated 10.03.2017 mandating pre-show cause notice consultation in all cases involving demands exceeding fifty lakhs except preventive or offence-related matters – HELD – Board Instructions dated 21.12.2015 bearing reference 1080/09/DLA/MISC/15, as clarified by Circular dated 10.03.2017 bearing reference 1053/02/2017-CX, unequivocally mandated pre-show cause notice consultation in all cases involving demands exceeding fifty lakhs save and except preventive or offence-related matters. The present proceedings do not fall within excepted category as they did not arise out of any preventive or offence-related investigation. No pre-show cause notice consultation was undertaken and no opportunity of such consultation was afforded to Appellant prior to issuance of impugned notice. No material has been brought on record evidencing compliance with binding administrative instructions holding field on relevant date - The subsequent Circular No. 1079/03/2021-CX dated 11.11.2021 whereby such consultation was dispensed with in specified suppression-related cases was issued long after issuance of impugned SCN and cannot be pressed into service to validate an action already undertaken contrary to prevailing instructions as subsequent and more onerous circular operates only prospectively – The Show Cause Notice is void ab initio. The demand of Service Tax, interest and penalty are set aside - Service Tax – Penalty under Section 77 of Finance Act, 1994 – Appellant filed certain ST-3 Returns with delay attributable to shortage of staff – Whether penalty is imposable for late filing of returns when delay does not establish fraud, collusion, wilful misstatement or suppression of facts with intent to evade Service Tax warranting invocation of extended period of limitation – HELD – The statutory obligation to furnish returns within prescribed time is independent requirement under Finance Act, 1994 and any breach thereof is amenable to consequences contemplated under Section 77 of the Act. The delay in filing returns is admitted and undisputed factual position borne out from records. Such default, though not of nature warranting invocation of extended period of limitation or sufficient to establish fraud, collusion, wilful misstatement or suppression of facts, cannot altogether be overlooked while considering levy of penalty specifically prescribed for contravention of statutory procedural requirements. The legislative intent underlying Section 77 is to ensure timely compliance with procedural obligations cast upon registered assessees independent of existence of any intention to evade tax – The penalty imposed under Section 77 of Finance Act, 1994 is upheld.
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